Policy brief Gaia Association for Cooking Programme in

1. Energy in Ethiopia impacts of cooking with biomass, and the contribution of non-

Ethiopia is a country of 94 million people in 18 million sustainable biomass extraction to greenhouse gas emissions. households with a total area of 1.1 million square kilometres. Its existing stock of infrastructure including Ethiopia is one of only three countries in the world with highest energy is very low (even in Sub-Saharan dependence of solid biomass standards). Access to sustainable energy is also low where only 23% of the population and less than 5% of the rural population is connected to . Access to sustainable sources of energy for domestic (such as cooking), productive (agriculture, rural enterprises), and social services is still very limited.

Ethiopia is a large, low income country with rapidly growing economy. Ethiopia’s economy and population is growing rapidly; as a result its demand for energy is 1 growing at even higher rates. Although infrastructure Source: World Bank expansion is a key agenda for the government and (http://data.worldbank.org/indicator/EG.USE.CRNW.ZS/countries?display=map) infrastructure investment has been sustained at high levels for the past decade there is still a large gap in 2. Rationale for promoting ethanol as cooking fuel terms of meeting demands. Meeting cooking energy requirements sustainably calls for Ethiopia depends on a limited set of energy sources to actions in three directions: improving energy efficiency, meet its energy requirements: electricity is generated sustainable management of existing sources of energy, and mostly from large plants, transport is introducing new sustainable fuels. Considerable effort is going exclusively petroleum based, and cooking energy into improving energy efficiency and management of resources requirement in households is met mainly with biomass for biomass fuels; relatively less effort is directed towards fuels. Limited diversity in supply exposes consumers to providing new sustainable fuels for cooking. Ethanol is one of access risks. The hydropower dominated power the new fuels that are considered viable in the Ethiopian context system is exposed to climate variability, petroleum because it is a clean domestic fuel with growing availability at supplies are imported and suffer from international competitive prices. price volatility and foreign exchange availability, and access to biomass fuel supply for cooking has Ethanol is produced from molasses in Ethiopia. deteriorated due to declining biomass yields and Domestic annual production from sugarcane molasses alone stocks. Increasing diversity and improving may rise to 350 million litres in the next five years due to the sustainability is now given due attention: wind and expansion of production in Ethiopia.2 In addition to are promoted for the power sugarcane molasses, Ethiopia has other potential feedstock for sector; electric railways are under development for ethanol production including sugar crops, sweet sorghum, and transport; and cooking fuel alternatives, including crop waste (fruits, vegetables, sugar crops) which may increase liquid bio-fuels, are promoted for cooking. potential output to 500 million litres or more annually. Ethanol can be locally produced at small, medium or large scale. Ethiopia’s high dependence on non-sustainable source Small scale production enables localization of the ethanol of energy, particularly biomass, for cooking has been a production process, increasing the domestic content of ethanol major concern over the past thirty years. The concern produced in Ethiopia. Ethanol has a high energy to volume ratio in the initial years was related to the potential which makes it ideal for transport (its storage and transport also contribution of biomass energy demand to does not require expensive equipment, unlike LGP for instance). and growing access problems to consumers (long collection distances and times). In 1 2 recent years concern has grown due to the health Potential ethanol production from government owned sugar factories alone is estimated at 350 million liters annually. The amount that will be available for cooking will be 250 million liters (setting aside 100 million 1 According to the EEP, unconstrained electricity demand is liters for gasoline blending). This is enough to meet the cooking (excluding growing at 2.1 times that of GDP, and demand for petroleum baking) energy requirements of 0.6 million households (i.e., 3% of all and other fuels is growing at high rates also. Ethiopian households). At current market prices ethanol is a cheaper cooking spanning from research and development in technologies to fuel compared to kerosene and LPG; it is slightly more investment and marketing need to be undertaken by expensive than biomass; and much more expensive government and private enterprise to achieve this goal. than electricity. However, social valuation of ethanol and the alternatives makes ethanol a cheaper cooking The mission of the Science, Technology and Innovation (STI) fuel compared to both petroleum and biomass fuels. Policy (2012) is stated as “creating a technology transfer The health and environmental benefits of ethanol framework that enables building national capabilities in compared to petroleum and biomass fuels further technological learning, adaptation and utilization through improves its competitiveness against petroleum and searching, selecting and importing effective technologies in biomass cooking fuels manufacturing and service enterprises.” The current effort to

Demand Projection for Ethanol for Cooking manufacture components of ethanol distilleries (micro and small 600 scale) and ethanol stoves are in line with the STI policy. 554.6 Rura Urban Total 80.0 500 455.5 4. Issues that have inhibited the large scale adoption of 474.7 ethanol for cooking in Ethiopia 400 374.8 72.8

309.1 66.3 382.7 300 The potential market for ethanol as cooking fuel is half a million 60.3 308.6 or more households by 2025. The current market size is about

(Million (Million Liters) 200 248.8 3,000 households, i.e., less than 0.5% of the potential. Although it has been ten years since ethanol has been introduced as a 100 cooking fuel in Ethiopia its market is essentially limited to very

0 few households in . The market for ethanol as 2015 2020 2025 2030 cooking fuel has not grown because of availability constraints, rising price for ethanol, inadequate public awareness and 3. The national policy framework for promoting marketing, and limited distribution infrastructure and services. ethanol as cooking fuel a. Availability of supply: availability of ethanol for cooking has Ethiopia’s vision for 2025 is to become a middle been uncertain since the introduction of the fuel for cooking income country in a climate- resilient and green ten years ago. This has inhibited existing distributors from economy path. Climate resilience and green growth investing in distribution and also on marketing the fuel. are promoted because of the vulnerability of the Uncertainty about long-term availability of ethanol in large economy to climate variability (e.g. agriculture), volumes has also inhibited potential new entrants (such as resource limitations of continuing the current petroleum companies) from entering the market. Although development path (e.g. expansion of cropland, supply availability has improved recently with special increased livestock numbers), the financial risks of allocation for cooking, however, the market was already depending on traditional technologies (e.g. petroleum depressed because of supply uncertainties in the past, the imports), and to reduce greenhouse gas emissions sharp price rise and distributors could not sell as planned. (CRGE, 2011). Investment requirements for ethanol distilleries are high at both large and micro scale. Large distilleries require several Protecting and re-establishing forests is one of the hundred millions ETB3 while micro distilleries require four pillars of the green economy plan. Introduction of relatively smaller amounts. For instance, a 1,000 litres/day ethanol as a domestic renewable cooking fuel meets distillery plant costs around ETB 5 million. Investment the aim of reducing forest degradation (replacing constraints from the public sector may be addressed by biomass fuels) and at the same time reduce the promoting private and foreign investment in ethanol financial risks to the economy of dependence on distilleries. Private and foreign investment in ethanol imports (replacing petroleum fuels). distilleries will depend on competitive supply of sugarcane molasses from government sugar factories and also The Draft National Energy Policy (2013) identifies competitive pricing of ethanol for consumers. ethanol as a domestic renewable fuel that will b. Alternative options for ethanol feedstock production and improve the security and reliability of energy supply processing: alternative feedstock that are viable in Ethiopia (as transport and cooking fuel). The policy identified including sweet sorghum, sweet potato, sugar beet, cassava, the two barriers that have limited scale-up of ethanol prickly pear cactus, vegetable and fruit waste, have not as cooking fuel in Ethiopia as inadequate distribution been sufficiently explored as possible sources of ethanol system, and the high cost of purchasing ethanol production. Small and micro scale processing of feedstock stoves. The policy recommends increasing ethanol with small and micro scale ethanol distilleries has also not production and improving marketing and distribution been given sufficient attention in the past. Feedstock 2 for wider adoption of ethanol as cooking fuel. production and processing at small scale by private enterprises or cooperatives could supplement large scale The policy stressed the need for a systematic value- production and processing by the public sector. chain development approach to establish ethanol as a true alternative cooking fuel in Ethiopia. Actions 3 USD 1 = 20.05 (ETB) (10 December 2014) c. Ethanol pricing relative to alternatives: ethanol is . Household energy expenditure. Households that are in competition with wood, charcoal, kerosene, substituting ethanol will make savings on expenditure on LPG and electricity. The price for ethanol has ETB 136 per year and ETB450 per year on kerosene and eroded its competitiveness with these fuels charcoal, in their respective orders. The aggregate savings making it less attractive to consumers. The over the same period is estimated at ETB 5,131 million and expressed interest of the government to promote the net present value 10.23% discount rate ETB 2,185 the fuel for its economic and environmental million. benefits does not appear to have been considered . Kerosene import substitution and foreign exchange. The in setting its price. ethanol for cooking programme will allow the displacement d. Public awareness and marketing: the public is not of 1,747 million liters of imported kerosene. At the current aware of the existence of ethanol as a potential import price of USD0.65/liter, USD1,135 million will be alternative cooking fuel. Very few households use saved. ethanol for cooking, therefore, few have first- . Avoided energy-related deforestation. The Programmed hand knowledge of ethanol as cooking fuel (they will allow the substitution of fuel wood and charcoal themselves using the fuel or seeing others use the amounting to about 33 million tonnes of Fuel wood fuel). There has also been no public awareness Equivalent. At 75 tonne/ha of above-ground biomass, this is campaign to promote the fuel. translated into an avoided deforestation of 441 thousand e. Distribution capability: existing ethanol ha. distributors have very limited distribution capacity . Job creation. A total of 118 micro-distilleries of both financially (to purchase and distribute in 1,000liter/day capacity will be required to fill the demand- significant volumes) and physically (storage and supply gap. These will create approximately 17,200 new distribution facilities). Existing distributors of permanent jobs over the 15 year time horizon. ethanol for cooking are essentially small . Green House Gas (GHG) emission reduction. Over the 15 enterprises for whom ethanol distribution is a year period, the Programme will allow the avoidance of

secondary business. Potential large scale 65million tonnes CO2 equivalent. Based on a market price distributors (such as petroleum companies) have of USD5.00/tCO2e, it could generate USD325 million in yet to enter the market because of supply carbon revenues. uncertainties. f. There are also inadequate support for functions in the supply chain: including technology Private enterprises distributing ethanol as well as the public adaptation (distilleries, stoves), R&D for institutions that produce ethanol and promote its use as cooking feedstock, standards and regulations for ethanol fuel agree market development to be the key goal. Sustainable fuel and stove, financing of investment and R&D. market development requires suitable policies and regulations, investment in ethanol production and distribution, promotion and marketing. The following actions need to be taken for 5. Recommendations for large scale adoption of ethanol to become a viable alternative cooking fuel in Ethiopia: ethanol for cooking in Ethiopia a. Increase ethanol production and ensure long-term The commercial market for ethanol as cooking fuel is availability. very small and limited to Addis Ababa. The market is . Increase ethanol production from government sugar not growing and probably shrinking because of factories through both government and private investment. uncertainties of supply and rising prices. On the other Government should promote private investment (local, hand, potential availability of ethanol is high from foreign, joint) in ethanol distilleries for the new sugar state owned sugar factories (from public and private factories. There is already such a plan by the government investment in ethanol distilleries from molasses but this plan must be pursued strongly. Investors also seek waste). There is also potential to promote private competitive and stable prices for inputs (molasses investment in ethanol distilleries from a variety of purchases) and outputs (ethanol wholesale) and feedstock including sugarcane, sweet sorghum, other government must provide long-term price incentives to sugar crops, and crop waste. attract private investment. . Promote diversity of ethanol production feedstock (other There is clear advantage in using ethanol for cooking than sugarcane molasses). Provide policy guidance for rather than for other uses including as gasoline blend feedstock cultivation for ethanol production to increase and or export. Cooking can be the largest market for diversity ethanol production sources and to attract ethanol produced in Ethiopia; cooking with ethanol investment. The Bio-fuel Policy does not provide guidance has multiple economic (at consumer level and on whether feedstock other than sugarcane molasses (and nationally) and environmental benefits. sugarcane) can be used as ethanol feedstock. Clear policy 3 guidance on this will attract investment in ethanol distilleries.

. Ensure/secure/guarantee long-term (10 years) . Provide investment incentives for ethanol distributors to sustained supply of ethanol for cooking at invest in storage and distribution infrastructure; also growing levels from government ethanol provide low-cost safe designs for storage and distribution of distilleries. Guaranteed allocation of sufficient ethanol. ethanol for cooking will increase market share for . Develop and implement safe ethanol storage and ethanol in urban areas. Allocation should be distribution standards. based on market demand assessment for the fuel. . Increase R&D in ethanol distilleries and ethanol This policy brief is an output of the Holistic Feasibility Study of “A stoves to lower supply costs. Ethanol micro National Scale-up Program for Ethanol Cook stoves and Ethanol distilleries promote rural agro-industry. This is an Micro Distilleries (EMDs)” project funded by DFID, with area that is given high priority for investment by contribution from the Norwegian and Danish governments the government together with manufacture. through the Strategic Climatic Institutions Programme (SCIP). Micro distilleries also promote rural However, the views expressed and information contained in this commercialization which is a strategic focus for document are not necessary those of or endorsed by DFID or the agriculture sector. Investment in micro contributing governments, which can accept no responsibility or distilleries will therefore receive the investment liability for such views, completeness or accuracy of information incentives outlined above. or for any reliance placed on them. b. Price ethanol competitively to increase its market share. Gaia Association is an Ethiopian resident charity . Implement social valuation of ethanol to ensure organization established in 2005 to promote the use of that non-financial benefits of ethanol are renewable ethanol fuels for household energy in Ethiopia. The reflected in its price. Make rationale economic, Gaia Association seeks to reduce household energy dependence social and environmental valuation of the benefits on imported petroleum and hazardous solid bio-fuels, improve and costs of using ethanol for cooking, as gasoline indoor air quality by preventing smoke-related health problems, blend or for export. Allocation and pricing of and increase user safety and quality of life. ethanol among the alternative uses should be based on such rationale valuation not on enterprise level decisions. Published By: . Provide tax exemptions for ethanol if production Gaia Association cost for ethanol exceeds levels that make it P.O. Box 1460/1250 Addis Ababa, Ethiopia competitive with other cooking fuels (this will of Tel: +25111618 3540 course depend on the economic/social price of Fax: +25111662 7402 ethanol). E-mail: [email protected] . Provide long term outlook for price development Website: www.projectgaia.com for ethanol to ensure sustained engagement of investors in ethanol distilleries and ethanol distribution. Alternative feedstock for Ethanol Production c. Integrate ethanol as a clean cooking alternative in the National Improved Cook stoves (NICS) program of Ethiopia. Clean cooking with ethanol

will then benefit from national efforts for public Sugarcane Mango Fruit Cactus Sweet Potato Maize awareness and education, standards and their regulation, financing, and RET enterprise development. Partners

d. Distribution capability: provide incentives to

existing distributors and potential new MEF distributors to invest in distribution of ethanol. . Attract large companies (e.g. petroleum distributors) to engage in ethanol distribution (through supply guarantees, attractive distribution margins) . Provide alternative distribution models for ethanol (bottled ethanol, ethanol at the petrol 4 pump)